Managing Global System

Chapter 15
Managing
Global Systems
15.1
2010 by Prentice Hall
Management Information Systems

Chapter 15 Managing Global Systems
LEARNING OBJECTIVES
Identify the major factors driving the internationalization

of business.
Compare strategies for developing global businesses.
Demonstrate how information systems can support
different global business strategies.
Identify the challenges posed by global information
systems and management solutions.
Evaluate the issues and technical alternatives to be
considered when developing international information
systems.
15.2

Severstal Creates an IT Infrastructure for Global Steelmaking
Problem: Needed global production platform; existing

infrastructure was a hodge-podge of different systems,
platforms; data did not flow between systems
Solutions: Standardized on Oracle E-Business Suite 12,
an enterprise application with modules for multiple
functions
With integrated system, Severstal NA is able to optimize
end-to-end processes instead of individual processes; to
deliver higher quality and timelier reporting to parent
company
Illustrates digital technology being used by global firms
adjusting their systems to support rapid growth in world
trade
15.3

The Growth of International Information Systems
Global economic system and global world order

driven by advanced networks and information
systems
Growth of international trade has radically altered
domestic economies around the globe
For example, production of many high-end electronic
products parceled out to multiple countries
E.g., Hewlett-Packard laptop computer
15.4

An HP Laptops Path to Market
Hewlett-Packard and other electronics companies assign

distribution and production of high-end products to a
number of different countries.
Figure 15-1
15.5

Strategy when building international systems

1. Understand global environment
Business drivers pushing your industry toward global competition
Inhibitors creating management challenges
2. Develop corporate strategy for competition

How firm should respond to global competition
3. Develop organization structure and division of labor

Where will production, marketing, sales, etc., be located
4. Consider management issues

Design of business procedures, reengineering, managing change
5. Consider technology platform

15.6

International Information Systems Architecture
The major dimensions for developing an international information systems architecture

are the global environment, the corporate global strategies, the structure of the
organization, the management and business processes, and the technology platform.
Figure 15-2
15.7

Global business drivers:

General cultural factors lead toward internationalization and result in
specific business globalization factors
15.8
GENERAL CULTURAL FACTORS
SPECIFIC BUSINESS FACTORS
Global communication and

transportation technologies
Development of global culture
Emergence of global social norms
Political stability
Global knowledge base
Global markets
Global production and operations
Global coordination
Global workforce
Global economies of scale

Challenges and obstacles to global business

systems
General cultural challenges
Cultural particularism
Regionalism, nationalism, language differences
Social expectations:
Brand-name expectations, work hours
Political laws
Transborder data flow
Transborder data and privacy laws, commercial regulations
15.9

Challenges and obstacles to global business systems (cont.)

Specific challenges
Standards
Different EDI, e-mail, telecommunication standards
Reliability
Phone networks not uniformly reliable
Speed
Different data transfer speeds, many slower than U.S.
Personnel
Shortages of skilled consultants
15.10

State of the art

Most companies have inherited patchwork international systems
using 1960s-era batch-oriented reporting, manual entry of data
from one legacy system to another, and little online control and
communication
Significant difficulties in building appropriate international
architectures
Planning a system appropriate to firms global strategy
Structuring organization of systems and business units
Solving implementation issues
Choosing right technical platform
15.11

Organizing International Information Systems
Global strategies and business organization

Three main kinds of organizational structure
Centralized: In the home country
Decentralized/dispersed: To local foreign units
Coordinated: All units participate as equals
Four main global strategies
Domestic exporter
Multinational
Franchisers
Transnational
15.12

Global Business Strategy and Structure

BUSINESS
FUNCTION
DOMESTIC
EXPORTER
MULTINATIONAL
FRANCHISER
TRANSNATIONAL
Production
Centralized
Dispersed
Coordinated
Coordinated
Finance/
Accounting
Centralized
Centralized
Centralized
Coordinated
Sales/
Marketing
Mixed
Dispersed
Coordinated
Coordinated
Human
Resources
Centralized
Centralized
Coordinated
Coordinated
Strategic
Management
Centralized
Centralized
Centralized
Coordinated
15.13

Global systems to fit the strategy

Configuration, management, and development of systems tend
to follow global strategy chosen
Four main types of systems configuration
Centralized: Systems development and operation occur totally at
domestic home base
Duplicated: Development occurs at home base but operations
are handed over to autonomous units in foreign locations
Decentralized: Each foreign unit designs own solutions and
systems
Networked: Development and operations occur in coordinated
fashion across all units
15.14

Global Strategy and Systems Configurations
The large Xs show the dominant patterns, and the small Xs show the
emerging patterns. For instance, domestic exporters rely predominantly
on centralized systems, but there is continual pressure and some
development of decentralized systems in local marketing regions.
Figure 15-3
15.15

To develop a global company and information

systems support structure:
1. Organize value-adding activities along lines of comparative
advantage
E.g., Locate functions where they can best be performed, for least
cost and maximum impact
2. Develop and operate systems units at each level of corporate

activityregional, national, and international
3. Establish at world headquarters:
15.16
Single office responsible for development of international systems
Global CIO position

Managing Global Systems
Principle management challenges in developing

global systems
Agreeing on common user requirements
Introducing changes in business processes
Coordinating application development
Coordinating software releases
Encouraging local users to support global systems
15.17

Typical scenario: Disorganization on a global scale

Traditional multinational consumer-goods company based in
U.S. and operating in Europe would like to expand into Asian
markets
World headquarters and strategic management in U.S.
Only centrally coordinated system is financial controls and reporting
Separate regional, national production and marketing centers

Foreign divisions have separate IT systems
E-mail systems are incompatible
Each production facility uses different ERP system, different
hardware and database platforms, etc.
15.18

Global systems strategy
Share only core systems
Partially coordinate systems that share some key

elements
Do not have to be totally common across national

boundaries
Local variation desirable
Peripheral systems
15.19
Core systems support functionality critical to firm
Need to suit local requirements only


Local, Regional, and Global Systems
Agency and other coordination costs

increase as the firm moves from local
option systems toward regional and global
systems. However, transaction costs of
participating in global markets probably
decrease as firms develop global systems.
A sensible strategy is to reduce agency
costs by developing only a few core global
systems that are vital for global
operations, leaving other systems in the
hands of regional and local units.
Source: From Managing Information
Technology in Multinational Corporations by
Edward M. Roche, 1993. Adapted by
permission of Prentice Hall, Inc., Upper
Saddle River, N.J.
Figure 15-4
15.20

1. Define core business processes

2. Identify core systems to coordinate centrally
3. Choose an approach
Piecemeal and grand design approaches tend to fail
Evolve transnational applications incrementally from

existing applications
4. Make benefits clear
15.21
Global flexibility
Gains in efficiency
Global markets and larger customer base unleash new

economies of scale at production facilities
Optimizing corporate funds over much larger capital base


The management solution

Agreeing on common user requirements
Short list of core business processes
Develop common language, understanding of common
elements and unique local qualities
Introducing changes in business processes
Success depends on legitimacy, authority, ability to involve
users in change design process
Coordinating applications development
Coordinate change through incremental steps
Reduce set of transnational systems to bare minimum
15.22

The management solution (cont.)

Coordinating software releases
Institute procedures to ensure all operating units update at
same time
Encouraging local users to support global systems
Cooptation: Bringing the opposition into design and
implementation process without giving up control over direction
and nature of the change
Permit each country unit to develop one transnational application
Develop new transnational centers of excellence
15.23

Colgate-Palmolive Keeps the World Smiling

Read the Interactive Session: Management, and then
discuss the following questions:
Why was the traditional method of allocating IT resources to profits
no longer effective?
Why is it important for central U.S. management to understand the
global disposition of IT personnel and funds?
Which of the four global business strategies described in this
chapter is Colgate pursuing, and how has this affected its selection
of an IT resource management system?
What elements of The Management Solution, described in this
chapter, are mentioned in the case study? What elements are
missing?
15.24

Technology Issues and Opportunities for Global Value Chains
Technology challenges of global systems

Computing platforms and systems integration
How new core systems will fit in with existing suite of applications
developed around globe by different divisions
Standardization: Data standards, interfaces, software, etc.
Connectivity
Internet does not guarantee any level of service
Many firms use private networks and VPNs
Low penetration of PCs, outdated infrastructures in developing
countries
15.25

Technology challenges of global systems (cont.)

Software
Integrating new systems with old
Human interface design issues, languages
Software localization: converting software to operate in second
language
Most important software applications:
TPS and MIS
Increasingly, SCM and enterprise systems to standardize business
processes
Applications that enhance productivity of international teams
15.26

Internet Penetration by Region
The percentage of the total

population using the Internet in
developing countries is much
smaller than in the United States
and Europe.
Source: CIA World Factbook, 2008.
Figure 15-5
15.27

Can Cell Phones Close the Global Digital Divide?
Read the Interactive Session: Organizations, and then discuss

the following questions:
What strategies are cell phone companies using to close the digital
divide and market phones to the poorest segment of the worlds
population?
Why do economists predict that widespread cell phone usage in
developing countries would have an unprecedented effect on the
growth of those countries?
What are some examples of how cell phones might increase quality
of life for residents of developing countries?
Do you believe that cell phones will proliferate widely through Africa
and Asia? Why?
15.28
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Chapter 15

2010 by Prentice Hall

Management Information Systems

Identify the major factors driving the internationalization

2010 by Prentice Hall

Management Information Systems

Problem: Needed global production platform; existing

2010 by Prentice Hall

Management Information Systems

Global economic system and global world order

2010 by Prentice Hall

Management Information Systems

An HP Laptops Path to Market

Hewlett-Packard and other electronics companies assign

2010 by Prentice Hall

Management Information Systems

Strategy when building international systems

2. Develop corporate strategy for competition

3. Develop organization structure and division of labor

4. Consider management issues

5. Consider technology platform

2010 by Prentice Hall

Management Information Systems

International Information Systems Architecture

The major dimensions for developing an international information systems architecture

2010 by Prentice Hall

Management Information Systems

Global business drivers:

GENERAL CULTURAL FACTORS

SPECIFIC BUSINESS FACTORS

Global communication and

2010 by Prentice Hall

Management Information Systems

Challenges and obstacles to global business

2010 by Prentice Hall

Management Information Systems

Challenges and obstacles to global business systems (cont.)

2010 by Prentice Hall

Management Information Systems

State of the art

2010 by Prentice Hall

Management Information Systems

Global strategies and business organization

2010 by Prentice Hall

Management Information Systems

Global Business Strategy and Structure

2010 by Prentice Hall

Management Information Systems

Global systems to fit the strategy

2010 by Prentice Hall

Management Information Systems

Global Strategy and Systems Configurations

2010 by Prentice Hall

Management Information Systems

To develop a global company and information

2. Develop and operate systems units at each level of corporate

Single office responsible for development of international systems

Global CIO position

2010 by Prentice Hall

Management Information Systems

Principle management challenges in developing

2010 by Prentice Hall

Management Information Systems

Typical scenario: Disorganization on a global scale